Barclays extends Shiller CAPE index family

Oct 27th, 2013 | By | Category: ETF and Index News

Barclays has launched European sector versions of the Shiller Barclays CAPE Index Family. The European versions serve as a complement to the US sector versions of the index which were launched in September 2012.

Barclays extends Shiller CAPE index family

Professor Robert Shiller (© World Economic Forum)

The Shiller Barclays CAPE Index Family, developed jointly by Professor Robert Shiller, a Nobel prize-winning economist, and Barclays, uses the cyclically adjusted price-to-earnings (CAPE) ratio as a key driver for the valuation of sectors.

The new indices offer European equity market exposure with a value bias, and are intended for buy-and-hold investors with a multiyear time horizon. They have been designed to underlie investment products, including exchange-traded products such as ETNs and ETFs.

The index family systematically identifies four favourable sectors, from a universe of ten European sectors, based on the CAPE ratio and price momentum.

Commenting on the launch, Professor Robert Shiller said: “I have been very happy with the performance of the Shiller Barclays US CAPE Index family and the response from clients, and am delighted to collaborate again with Barclays to launch the European Index Family that systematically invest in undervalued European sectors. The Shiller Barclays CAPE Europe Index Family will provide investors with equity market exposure with a ‘value’ sector bias, which may provide attractive long term returns for buy and hold investors.”

Anthony Lazanas, Head of Portfolio Modeling and Index Strategies at Barclays, added: “The launch of the Shiller Barclays Europe CAPE Index Family expands our offering of investable equity indices and provides our clients with geographical diversification for value investing. This extension to our Shiller Barclays CAPE family of indices, again backed by the joint work of Professor Shiller and Barclays, highlights our commitment to bringing clients a full array of investable indices based on high-quality research.”

The index family will initially include three indices:

  • Shiller Barclays CAPE Europe Sector Index, which has equal weights in the four undervalued sectors with most positive momentum, aiming to provide a ‘focus value’ investment.
  • Shiller Barclays CAPE Europe Sector Tilted Index, which has overweight in the four undervalued sectors with most positive momentum and underweight in the remaining six sectors, aiming to provide an ‘enhanced value’ investment while maintaining the diversification across all the sectors.
  • Shiller Barclays CAPE Europe Sector Market Hedged Index, which holds a long position in the Shiller Barclays CAPE Europe Sector Index and a short position in the MSCI Europe Index (the benchmark) according to the weighted sum of the beta of the selected sectors, aiming to provide a ‘market neutral value’ investment.

Benedict Redmond, Director in Equities and Funds Structuring at Barclays, said: “Since launching the Shiller Barclays CAPE indices for US sectors last year, we have seen a wide range of investors look to take positions in undervalued stocks via use of the well-known CAPE measure, so now is an opportune time to launch the European sector versions.”

Although no announcements have been made, the indices could well find themselves underlying index-linked products issued by Barclays.

In October last year, the bank launched the Barclays ETN+ Shiller CAPE ETN (CAPE), an ETN linked to the Shiller Barclays CAPE US Core Sector Index. This index incorporates the CAPE ratio to assess the equity valuations of the nine sectors in the S&P 500. Like the Shiller Barclays CAPE Europe Sector Index, the index selects the top four undervalued sectors that possess relatively stronger price momentum over the past twelve months and allocates an equally weighted notional long position in the total return version of the relevant sector indices.

The product is listed on the NYSE Arca and comes with an annual management fee of 0.45%.

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